NexPoint Residential Trust (NXRT) Q2 Earnings call transcript Jul 30, 2024

In a recent earnings call, NexPoint Residential Trust (NXRT) provided a comprehensive overview of their financial performance and strategic initiatives for the second quarter of 2024. The call, led by executives including Brian Mitts, Chief Financial Officer; Matt McGraner, Chief Investment Officer; and Bonner McDermett, Vice President of Asset and Investment Management, highlighted key trends and updates in the company's operational and financial landscape.

Financial Performance and Guidance

The company reported a net income of $10.6 million or $0.40 per diluted share for the second quarter, a significant improvement from the net loss of $4 million or $0.15 loss per diluted share in the same period last year. This positive trend was driven by a combination of strategic sales and operational efficiencies, as evidenced by an increase in same-store NOI by 2.4% and a healthy 61.1% same-store NOI margin.

NXRT also announced a dividend of $0.46 per share for the second quarter, representing a 124.5% increase since inception. The company's dividend coverage remained robust, with a 1.48x coverage by core FFO and a payout ratio of 68%.

Strategic Initiatives and Trends

In terms of strategic initiatives, NXRT highlighted the sale of Radbourne Lake for a sales price of $39.25 million, which generated a 19.2% levered IRR and 3.6x multiple on invested capital. The company also completed the purchase and retirement of $14.6 million of its common stock, representing an attractive discount to the midpoint of its Q1 2024 NAV range.

On the operational front, NXRT reported a 2.6% increase in same-store rental revenue, with five of its ten markets averaging at least 2% growth. The company's strategic focus on upgrading units and leasing upgraded units has yielded positive results, with an average monthly rent premium of $240 and a 20.1% return on investment.

Challenges and Outlook

The call also addressed challenges and opportunities in the broader market landscape. Raleigh real estate taxes have been a significant expense for the company, accounting for 33% of total expenses year-to-date. While the company is working to mitigate the impact through active property tax appeals, it remains a significant concern for the second half of the year.

Supply demand imbalances continue to favor landlords, with annual starts at their lowest level in ten years and expected to remain low in the near term. This trend, coupled with the company's strategic refinancing initiatives, is expected to bolster the company's balance sheet and position it for future success and growth.

Conclusion

Overall, NexPoint Residential Trust's second quarter earnings call provided a positive outlook for the company's financial health and strategic initiatives. The company's focus on operational efficiencies, strategic sales, and strategic refinancing initiatives positions it well for continued growth and success in the face of market challenges. As the company moves into the second half of the year, investors and stakeholders will closely watch the outcomes of its property tax appeals and refinancing efforts to assess the potential impact on NAV and future performance.